CBM Boom

Several coalbed methane (CBM) pipelines are planned for North China's Shanxi Province, home to one-third of China's coal reserves. With a total investment of over three billion yuan, they will better utilize the province's vast CBM resources - a coal mine gas with components similar to natural gas.

China plans to build 10 CBM pipelines by the end of 2010, according to the 11th Five-Year Plan (2006-10) for the CBM industry. Nine of them will start from or go through Shanxi Province.

The 10 pipelines will have a length of 1,441 kilometers, with a total capacity of 6.53 billion cubic meters and require an investment of 3.09 billion yuan, according to the plan.

"We will start construction on four to five pipelines among the 10 during the 11th Five-year Plan period," Sun Maoyuan, general manager of China United Coalbed Methane Co Ltd (CUCBM), tells China Business Weekly. "Currently our company is planning for some pipelines in the eastern and central parts of Shanxi, and we are still considering locations and routes."

CUCBM, the nation's largest CBM firm, together with other companies, are also planning the first cross-province pipeline in the nation. The project will link Duanshi County in Shanxi with Bo'ai County in Henan, passing through the city of Jincheng in Shanxi Province.

The 120 kilometer-long pipeline has a designed capacity of one billion cubic meters. The project's total investment will be between 400 and 500 million yuan, Sun says.

The Duanshi-Bo'ai line will ease the natural gas shortage in Henan Province, which has seen increasing demand for energy in recent years. Some analysts estimate the natural gas supply shortage in Henan to be about one billion cubic meters each year.

"For example, a color TV tube plant located at Bo'ai County, which is also the end of our pipeline, needs 500 million cubic meters of CBM a year," Sun says. "The company is eager to get the gas resources from Shanxi."

CUCBM has developed Jincheng City, located in the Qinshui basin in the southeast of Shanxi, into a large CBM production base for the company. "Now together with the nation's largest oil company, PetroChina, we have built production facilities with a capacity of one billion cubic meters per year in the basin," Sun says.

According to industry insiders, some CBM pipelines will be connected with the nation's west-east gas pipeline, but Sun's company has no plans to link the CBM pipelines with the west-east line.

"The CBM pipelines are low pressure while the west-east line is high pressure. Linking the two pipelines will result in a waste of money and energy for us," he says.

Fast lane

The construction of the CBM pipelines is a reflection of the quick development of China's CBM industry, says Huang Shengchu, president of the China Coal Information Institute.

"As a practical and reliable alternative energy source, CBM will relieve China's rising energy demand as well as reduce the number of gas explosions in coal mines," Huang tells China Business Weekly.

China started developing CBM in the 1990s, and the nation's CBM sector has developed quickly since 2004. "This year the nation's CBM production will continue to see double-digit growth, with the production of three billion cubic meters," Huang says. "In 2005 and 2006, China drilled as many CBM wells as it did between 1990 and 2004."

According to CUCBM's Sun, the company will drill over 400 CBM wells this year, equivalent to what it did last year.

"This year our company's CBM production capacity will reach 450 million cubic meters, compared with 200 million cubic meters last year," he says.

China boasts 37 trillion cubic meters of CBM reserves, the third largest in the world, after Russia and Canada. Last year, the National Development and Reform Commission (NDRC), China's top economic planning body, drafted the five-year plan for CBM development.

Under the plan China will increase its annual CBM output to 10 billion cubic meters in 2010. The country will explore and locate an additional 300 billion cubic meters of CBM reserves by 2010. An industrial system will be set up gradually to develop and utilize CBM.

A series of moves have been made to further develop the CBM industry. This year China adopted new preferential tax policies for the industry. Under the new policies, which took effect on January 1, CBM producers will enjoy a full rebate on the value-added tax they pay for CBM production.

In September, China set up the China United Coalbed Methane National Engineering Research Center. With a registered capital of 76 million yuan, the center is co-funded by six companies: CUCBM, PetroChina, Sinopec, Huaibei Mining Group, China University of Geosciences (Beijing) and Beijing Orion Co Ltd.

In the next two to three years the center will develop regulations for the CBM industry, and will develop advanced technologies for the industry with its own intellectual property, says Hu Aimei, the new center's general manager.

However, compared with other countries, such as the US, the world's largest CBM producer, the nation's CBM industry is still at an early stage. Regulations should be better enforced to better develop the industry, Sun says.

China's CBM sector has also seen active foreign investment. Established in 1996, CUCBM has signed 28 contracts with overseas investors on CBM exploration, mining and processing, with foreign investment totaling over $250 million.

(China Daily 10/22/2007 page3)